Africa's Largest Wireless Carrier to Shun Ethiopian Bid
Africa's Largest Wireless Carrier to Shun Ethiopian Bid
(Bloomberg) -- Ethiopia’s revived plan to sell a second telecom license to international operators received an early setback as Africa’s largest wireless carrier isn’t likely to resubmit a bid, according to people familiar with the matter.
MTN Group Ltd. offered $600 million to enter Africa’s second most populous country earlier this year, only to be rejected by the Ethiopian government. And while the state has since adjusted the terms of the auction in pursuit of attracting a higher amount, MTN sees the investment risk starting to outweigh the benefits, said the people, who asked to remain anonymous as the deliberations are not public.
MTN declined to comment. Eyob Tekalign, Ethiopia’s state minister for finance, did not immediately respond to a phone call and text message seeking comment.
Ethiopia awarded one license to a consortium including the U.K.’s Vodafone Group Plc in May, after accepting an offer of about $850 million and a commitment to invest ten times that amount over the next decade. The government has also put a minority stake in state firm Ethio Telecom up for sale alongside sugar assets, part of a privatization plan to raise funds for debt repayments and to boost the economy.
Civil War
Yet for MTN at least, developments such as Ethiopia’s ongoing civil war in the northern Tigray region have made entering the country less attractive than in the past, said the people. Tensions around the filling of a giant dam on the Nile are also a concern, they said, due to the increased threat of conflict with downstream nations Egypt and Sudan.
Operating in times of unrest carries the risk of telecom infrastructure being damaged, said the people, and Ethiopia will need about 7,500 to 8,000 new mobile towers to expand services around the country. Less than half of nation’s 110 million people have mobile-phone subscriptions, though improving services and adding customers will require significant investment.
While MTN has traditionally been prepared to enter markets that rivals consider too unpredictable, the carrier said a year ago it plans to exit Afghanistan, Yemen and Syria -- all affected by conflict. The shares have surged 89% this year as investors warm to a broader asset-disposal plan, the best performer on the FTSE/JSE Africa Top40 Index.
Mobile Money
MTN hasn’t finalized its plans for Ethiopia, said the people, and are still examining the situation. There’s also the possibility that another company will see a bid as more viable, especially as the country is now including the opportunity to offer mobile-money services from the outset.
“The Ethiopian Communications Authority wishes to inform all interested telecommunications operators to consider this attractive multinational investment opportunity and to remain tuned for additional information by the Authority on the launch date of the bid process,” the regulator said in a statement.
The Horn of Africa country is in the process of selling a 40% stake in Ethio Telecom. France’s Orange SA has shown an interest, having previously held a management contract with the firm in the early part of last decade.
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